Hospital Group Warns of PA Budget Cuts

May 21, 2015

Gov. Tom Wolf's proposed Pennsylvania budget has a detractor: the Hospital and Healthsystem Association of Pennsylvania (HAP).

The group, which represents all of the state's hospitals, takes issue with a $166.5 million reduction to hospital Medicaid payments. HAP's Vice President for Research Martin Ciccocioppo said the reduction is significant for a program that already doesn't cover the costs hospitals incur.

"On average, for every dollar of expense that a hospital incurs treating a Medicaid patient, the reimbursement coming through the Medicaid program is around 81 cents," he said.

Ciccocioppo said the cuts will hit particularly unprofitable services that Medicaid supplements, such as obstetrics.

"Right now and for a number of years, Pennsylvania has provided supplemental funding to hospitals that offer OB services in order to help the continue to be able to provide that service," he said. "There's only about 95 OB programs throughout the whole state of Pennsylvania now."

Ciccocioppo said it was closer to 200 a decade ago. In issuing their news release, HAP cited a recent study by the Pennsylvania Health Care Cost Containment Council or PHC4, which finds profit margins for acute care hospitals decreased from more than 6 percent to 5.7 percent in 2014. He said the need for funding is especially dire for small critical access hospitals which Ciccocioppo said are generally more remotely located and don't see enough patients to turn a profit. 

"Yet they're critical for patient access to health care services where they exist," Ciccocioppo said. "One of the programs that has been eliminated in the proposed budget is a supplemental payment to help keep critical access hospitals afloat." 

He said not only should the state restore proposed cuts to Medicaid payments for hospitals, but also they'd like to see a better payment program for outpatient services. Ciccocioppo said many hospitals struggle financially.

"In many cases, more than half the hospitals, they (profit margins) aren't even earning what is needed to be able to sustain the ongoing operation of the hospital and ensure the hospital's ability to continue to provide quality services, effective services in their communities," he said.

State budget negotiations resume in June. The PHC4 report on hospital profits can be found at PHC4.org.